When the markets or geopolitical events turn volatile, safe, historically low-risk investments often get a moment in the sun. Federal Deposit Insurance Corporation (FDIC)-insured accounts and other safer investments can help cautious investors combat inflation while securing their savings.
Are there safe investments with high returns?
While low risk generally does mean sacrificing https://kamalinews.id/ high returns, safer investment options like online savings accounts and certificates of deposit are paying significantly more than they have in recent history.
Still, the below accounts and investments often make the most sense when investing for the short term — meaning you may need to withdraw the money sometime soon, or you just can’t stomach the stock market’s wild ride.
Safe, FDIC-insured and government-backed options
The investments below all come with insurance, which make their risks practically nonexistent. Traditionally, they are considered very safe investments. However, their yields are also lower than what you might get by investing in the stock market for the long term.
1. Money market accounts
What are they? These are savings accounts that allow you to spend directly from the account. Savings accounts, by comparison, limit the number of transactions per month.
What’s safe about them? These FDIC-backed accounts guarantee deposits of up to $250,000 per institution per investor.
Where can I get one? Most banks offer money market accounts, but the national average APY per the FDIC is currently just 0.68%. (This rate is variable and may change). However, many online banks offer substantially higher rates.
2. Online high-yield savings accounts
What are they? These are fundamentally similar to typical savings accounts, but by operating strictly online, these banks don’t have to spend money on brick-and-mortar operations. In turn, they pass these savings on to you in the form of higher APYs.
What’s safe about them? Though they don’t come from a traditional brick-and-mortar bank, these accounts are still FDIC-insured.
3. Cash management accounts
What are they? The nature of these accounts varies slightly between providers today, but most of these products behave similarly to an online savings account. These have become more popular among online brokerages and robo-advisors lately because they make it easy for customers to move money seamlessly to and from an investing account.
Current returns: Around 5% or more among banks reviewed by NerdWallet. See NerdWallet’s best cash management accounts for current APYs.
4. Certificates of deposit (CDs)
What are they? Banks offer CDs because it gives them a set amount of cash upfront for a set period, which they can use to lend to other customers or invest. They often offer higher rates than savings accounts to incentivize you to start a CD. The downside? If you need to access the cash in your CD, you may be hit with an early withdrawal penalty, often consisting of a few months’ interest.
Current returns: Around 5% on the high end, depending on the term. See NerdWallet’s list of the Best CD rates.
5. Treasury notes, bills and bonds
What are they? When you purchase Treasurys, you’re essentially giving a loan to the government, and it’s paying you interest on that loan at regular intervals. If you hold it for the entire period, you’ll also get back the bond’s face value.
The most significant differences between Treasury bills, notes, and bonds are the length of time the government holds your money and your interest rate.